Investor · Toledo, OH · Member since 2012 · 292 posts · 34 votes
Hi; I am noticing that sellers are often upset about my estimate on repairs. I don't try to make extra money by overquoting repair expenses so I'm thinking of offering the seller an agreement where I double the repair estimate for the sale (buying at an even bigger discount) and then pay back the difference after repairs have been done. All contractors will be paid by check and sign a document stating their prices to me.
Has anyone used a similar agreement? How did it it work for you, both at the negotiation table and after the rehab?
That doesn't sound legal to me . Sounds like you would have to re submit the HUD 1 sheet after the fact .
I'm not an attorney, but I would guess that it's perfectly legal -- HUD-1 settlement sheets (and the RESPA laws that would often govern things like this) are only required to come into play on deals where the buyer is using a government-backed form of financing. Cash buyers aren't held to these standards.
Now, that said, I think it's a horrible idea. Just having to deal with a seller audit would add ridiculous complexity, and I can imagine edge cases where it would be difficult to encapsulate such an agreement into a contract.
That doesn't sound legal to me . Sounds like you would have to re submit the HUD 1 sheet after the fact .
I'm not an attorney, but I would guess that it's perfectly legal -- HUD-1 settlement sheets (and the RESPA laws that would often govern things like this) are only required to come into play on deals where the buyer is using a government-backed form of financing. Cash buyers aren't held to these standards.
Now, that said, I think it's a horrible idea. Just having to deal with a seller audit would add ridiculous complexity, and I can imagine edge cases where it would be difficult to encapsulate such an agreement into a contract.
It makes no sense to me.
Sale price 100k, actual repairs 15 k, buy for 70k.
Give seller back 15k 1-2 months after purchase, and repairs complete?
What's the point of this? Seller is supposed to be somehow satisfied that your contractors are showing the real/a fair price?
In your example the sales price would be 40k (70% ARV - double the repair estimate). The reason I asked about this was to potentially use it as a bargaining chip at negotiation. If it can be structured to work well and minimize disputes then there could be value to guaranteeing repair costs, that's all.
In your example the sales price would be 40k (70% ARV - double the repair estimate). The reason I asked about this was to potentially use it as a bargaining chip at negotiation. If it can be structured to work well and minimize disputes then there could be value to guaranteeing repair costs, that's all.
In my experience, you don't want to maintain any contractual ties to the seller after closing...just opens up too much of a headache and potential issues (in my experience/judgement)...